The State of Kerala has attained worldwide acclaim for its achievements
in improving the physical quality of life of the people, and in the creation
of social infrastructure, particularly in health and education systems.
While this focus has led to an all round quality of life that is significantly
superior to that of other Indian States, industrial growth has not been
commensurate with the State’s potential.

Although various initiatives have been taken in the recent past for promoting
industrial growth, bold and forward looking measures would be required
if Kerala is to capitalise on its unique strengths, and attain its deserved
position as a leading industrial State in the region. This policy, accordingly,
seeks to provide a strong impetus to the industrial growth of the State.

The Government recognises that for promoting rapid industrial development,
there should be a basic measure of agreement between the various stakeholders
and interest groups about the desired policy objectives and the means
of their attainment; between present and prospective investors, the workforce
and trade unions, and informed public opinion. In pursuit, therefore,
of uniform and consensual policy initiatives in related areas, this policy
is being announced in conjunction with a progressive labour policy.

It is hoped that the vision and approach delineated in this policy shall
facilitate rapid industrial progress and define a new paradigm of industrial
development in the State.

The Kerala Advantage

Kerala has an enviable tradition of literacy and social development, is
endowed with unique natural resources and is supported by a thriving diaspora.
High quality human capital and social development.
Kerala has enviable human resources. Its literacy levels are over 90 per
cent, significantly above the country average, especially for women. On
social indicators, too, Kerala is well ahead of other Indian states. The
state scores the highest among all Indian states on theUNDP Human Development
Index. Its female-to-male ratio is the best in the country, and among
the best in the world. It has the most extensive medical infrastructure
and the lowest infant mortality rate in the country. Moreover, at 25 per
cent, the number of people below the poverty line in the state is significantly
less than the national average of 35 per cent.

Traditional areas of strength.
Kerala’s long, scenic coastline has provided ample opportunities
for sectors such as tourism and marine products. The State is now one
of the highest earners of tourism revenues in the country and one of the
world’s premier tourist destinations. In addition, Kerala has begun
to leverage its strength in ayurveda, unani, naturopathy, and other traditional
healthcare systems that are growing in popularity throughout the world.
The state is also the leading producer of natural rubber, coconuts, pepper,
and cardamoms and the second largest producer of tapioca, cashew nuts
and coffee.

Economically successful diaspora.
NRIs from Kerala are economically successful, and remit significant amounts
to their home state. Over the past 5 years, deposits from non-resident
Keralities have grown at a healthy 15 per cent CAGR, and account for an
impressive 13 per cent of the country’s total NRI deposits. This
could grow further, through a systematic programme on the lines of the
initiatives undertaken by the Chinese Government.

However, the performance of the State in the industrial sector leaves
much to be desired. The hopes and aspirations of people of Kerala can
be fulfilled only by bringing in a paradigm shift in the policies hitherto
followed and articulating a vision of Kerala, new and bold.

Kerala offers numerous advantages to investors. A study conducted by the
Confederation of Indian Industry (CII) across 18 states in India, on the
attractiveness of the states in attracting investments, rated Kerala as
the third best in the country in overall ranking.

Kerala's
Ranking Among 18 Indian States

Law
& order

1

Education,
health expenditure

1

Social
sector

2

Affluence

3

Infrastructure
penetration

5

Investment
attractiveness

5

General
Achievement

6

Finance

6

Labour

8

Investment
climate

13

Overall
Composite Rank

3

Source:
CII sponsored study in September 2000.

However, as
is evident from the CII study, Kerala’s rank is relatively low with
regard to investment climate, labour relations and general achievement.
It is imperative that the negative perceptions, real or perceived of the
State are changed in order that private domestic and foreign direct investment
is channelised for the creation of wealth for the entrepreneur and the
development of the State.

Some steps already identified by experts would be to correct the unfavourable
labour policies, enhance substantially the quality and relevance of content
of professional/higher education, introduce user-friendly policies and
procedures for investors, simplify and rationalize laws and foster a culture
of user-to-pay rather than free entitlement.

Old mind-sets, conceptions and prejudices will have to be cast aside and
a series of measures which are at once bold and innovative will have to
be undertaken to facilitate the flow of investible resources into the
State, creating work for the unemployed and higher incomes for the entrepreneurs
and the State spurring on all round economic growth.

OBJECTIVES

The
Industrial Policy 2001 aims to accelerate the industrial growth in the
State by attracting a steady stream of investment in industry, infrastructure
and core strength sectors by creating a congenial investment climate in
the State. Considering the constraints that the State faces in increasing
productivity and growth in the other sectors, it is the industrial and
service sectors that hold out the most promise.

The growth in the industrial sector is contingent on massive investment.
Such investment cannot obviously come from the Government’s budget,
as it would involve an unbearable level of taxation. The solution lies
in attracting private investment into the State by creating an environment
that favours such investment.

The ultimate goals of the Industrial Policy 2001 are indicated
below:

Enhanced
and sustained industrial growth rate and generation of higher employment
in industry.

Creation and maintenance of an investment friendly climate and facilitation
of measures to maximize global and local investment in industry

Maximisation of private investment in infrastructure development, with
Government investment only in areas/functions where private investment
cannot be attracted.

Elimination of all restrictive labour practices, ensuring cordial industrial
relations and establishment of a new work culture, with productivity
orientation and productivity-linked wages.

Special legal dispensation enabling a more liberalized environment within
notified industrial zones, parks and estates.

Nurturing the scarce entrepreneurial talent for the sustainable creation
of industrial wealth with special emphasis on technically qualified
persons, those from the business community, women and disadvantaged
sections.

Co-ordination of industry with the educational system in order to produce
and update the particular knowledge and skills required by industry
form time to time.

Re-engineering the Government’s delivery mechanism (departments
and agencies as well as systems and procedures) to make them responsive,
result-oriented and transparent.

Special development of sunrise sectors including information technology,
biotechnology, food and agro processing, infrastructure and service
with high growth potential.

Maximisation of value addition within the State for indigenous produce
and minerals and intensive growth (particularly export-oriented) of
Kerala’s products and services.

Industrial development in a manner compatible with energy conservation
and environmental concerns.

Ensuring cost effectiveness and accountability by restructuring public
enterprises.

Providing a social safety net for those adversely affected by industrial
restructuring.

Reducing Government involvement in commercial activities and industrial
production gradually.

Empowerment of the traditional sector to face up to global challenges
by appropriate technology, productivity improvement, design / development
and marketing.

The State Government is bringing out a comprehensive labour policy and
necessary legislation to back up the policy. This will bring desirable
changes in the labour market and environment. While correcting the current
perception of Kerala labour by investors, it will build on strengths like
the short learning curve, high skill, intelligence and adaptiveness of
the State’s workforce.

2. SMALL SCALE
INDUSTRIES

The small-scale industrial sector will be equipped to cope with global
competition by suitable upgradation of technology, cost reduction techniques
and sound management. For this, the Department of Industries and Commerce
is to be re-engineered into a competent and professional support agency
for the SSI sector. The personnel of this ISO 9002 certified Department
will be trained appropriately and sector-specific cells created which
will interact with expert consultants to formulate profiles of projects
viable for Kerala, after conducting potential / demand surveys. The existing
industrial co-operative societies will be modernised and new ones promoted
under the Self-reliant Co-operatives legislation. Sector specific clusters
of industrial units will be promoted with the assistance of financial
institutions and skill development facilitated through common facility
centres and training institutions.

Private participation will be encouraged for the development of infrastructure
including new industrial estates and plots, with the Government acquiring
suitable land for entrepreneurs, identified by them. Household units,
especially to generate employment among women, will be promoted both in
the production and service sectors. The intensive industrialization programme
will be used to improve the documentation, technical knowledge and management
facilities with increased emphasis on technology upgradation for small-scale
industry and dissemination of information using digital technology and
networking. SIDCO will be moulded into an efficient, professional agency
for marketing of SSI products with common branding and publicity as well
as for other self-sustainable lines of business.

3. TRADITIONAL
INDUSTRIES

The
traditional industries in Kerala particularly coir, handlooms, khadi,
bamboo-based, handicrafts, artisanal and village (cottage) industries
etc. are plagued by problems of high cost production, low quality, absence
of diversified product range, inappropriate technology and incapacity
for professional marketing and export. Increased mechanization, large
scale of production and global competition in quality and price pose the
threat of massive redundancies in these high employment sectors of Kerala,
which may result in poverty and social problems.

The
Government proposes to meet these threats effectively by measures like
introduction of appropriate mechanization and technology, removal of inefficiencies
in the system, professionalising marketing and export and facilitating
large investment of private capital in these sectors which are now mostly
dominated by co-operatives. While continuing budgetary support would be
required to sustain the employment in these sectors, the policy and administrative
action will be focused on project/programme financing by financial institutions
with margin money grants or loans from the Government rather than full
finance/grants to apex co-operative bodies / Development Corporations
/ Boards. Special projects for technology upgradation and reduction of
pollution will also be supported jointly by the Government and financial
institutions.

To
attract private sector investment badly needed in these sectors, a special
scheme of investment subsidy with adequate incentives will be implemented,
so that our reliance on co-operatives heavily dependant financially on
the government for investment (often to the extent of 95% or more) will
be reversed. Agencies created primarily as apex organizations and for
marketing of traditional industry products like coir, handloom, khadi,
cottage industry products, handicrafts etc. will be given programme funding
rather than the non- conditional grants and share participation given
in the past in order to avoid wastage of scarce Government resources on
high overheads and to ensure delivery of their services (particularly
marketing) in the most cost effective manner, using private sector finance
and initiative at the retail level.

The
development and production of value added, diversified and innovative
products from traditional industries is proposed to be done by a cluster
based approach which will ensure the critical mass for forward integration.
Marketing, both domestic and global, is to be promoted by developing brand
equity for Kerala’s traditional industry products. Research and
development to create new processes and appropriate machinery will be
funded on a project-to-project basis with the provision for success fees
linked to effective commercialization and commissioning.

(i)
Handlooms

Around 50000 handlooms both in the private sector and in over 750 co-operative
societies provide employment to about 1.25 lakh weavers. Kerala State
Handloom Weavers Co-operative Society (HANTEX), the apex organization
of the co-operatives and Kerala State Handloom Development Corporation
Ltd (HANVEEV) providing services (especially marketing) to individual
weavers, are the principal development agencies assisting the Department
of Handlooms and Textiles.

The
handloom industry faces a serious crisis, owing to (i) competition from
cheap powerloom cloth from other states (ii) scarcity of quality yarn
(iii) price escalation of yarn, dyes, chemicals and other raw materials
(iv) the shrinking market for handlooms in Kerala (v) non-demand based
production and inadequacy of new designs and (vi) inefficiencies in the
system, particularly in the co-operative sector.

The
Deen Dayal Hathkargha Prothsahan Yojana (DDHPY) introduced by the Government
of India is a comprehensive scheme for the development of the handloom
industry. The assistance provided by the Government of India is sometimes
insufficient considering the wages and quality of living in Kerala and
hence it may be supplemented by State schemes. Welfare schemes of the
Government of India will also be popularized and implemented in the above
manner.

(ii)
Coir

Over
3 lakh direct workers exist in the coir sector, most of them attached
to the over 500 coir co-operatives in Kerala. Adequate low cost production
of coir fibre from the coconut husk is to be ensured by systematic collection
of husk from farmers, conversion to fibre by a mechanized process in the
de-fibring units to be set up on a large scale by private entrepreneurs.
Further investments will not be made by the State in the co-operative
defibring units set up. In order to maintain the quality and the relatively
high wages in the coir-spinning sector, special emphasis will be given
to develop and popularise spinning ratts with high productivity and appropriate
mechanization. The existing viable spinning co-operatives will be restructured
and modernised. Coirfed and the Kerala State Coir Corporation are to focus
their activities in marketing and development/popularisation of innovative
products such as geo-textiles, as originally envisaged and not in production.

Geo-textiles and other innovative products from the biodegradable coir
yarn are to be developed and made acceptable for civil engineering and
other varied applications where massive potential demand exists both in
India and abroad. Entrepreneur development, research and technology up-gradation
programmes along with substantial private investment in the coir sector
(now dominated by cooperatives) will be facilitated. Appropriate technology
will be introduced to enhance productivity and maintain the competitive
edge of Kerala coir, now seriously threatened by other fibres including
polymers and coir products from the other states. Quality improvement,
value addition, innovation, technology up-gradation, diversification and
export-oriented growth capitalising on the eco-friendliness of coir will
constitute the development strategy for the coir sector.

(iii)
Khadi & Village Industries

The khadi sector has at present most of the problems indicated for traditional
industries including handloom, but in a more acute form. As the production
process is totally manual, one unit of khadi cloth needs several times
the man-days needed by the mechanized textile sector and 4 times of that
of the handloom sector. At present there is a mismatch in production between
the spinning and weaving sectors in Kerala, which is proposed to be rectified
by expanding the weaving sector by retraining of trainable spinners as
weavers and providing new looms to them. Innovative designs in keeping
with consumer demand including in silk, permissible mechanization, standardization
of quality, incentives for private sector production of ready made garments
from khadi cloth, efficient marketing through private outlets with common
branding and facilitation of global exports are envisaged.

Village
(cottage) industries is the only sector where investment incentives (given
in the form of margin money grant of 25% / 30%) are directly linked to
employment generation. Massive employment through new village industries
is to be promoted by offering to prospective entrepreneurs project profiles
based on potential/ demand surveys, ensuring value addition especially
to agricultural produce and popularizing modern techniques of marketing.
The Kudumbashree model of development will be adopted especially in rural
areas to generate sustainable employment and enterprises.

(iv)
Handicrafts

Treating the handicrafts sector on par with the other traditional industries
for incentives and concessions, cluster-based development, common facilities,
mechanized production to reduce costs, targeting the global market and
promotion of entrepreneurs in the business of production and marketing
of handicrafts are the corner stones of the handicrafts development policy.
An innovative approach of attracting outsourced production contracts for
the ethnic handicrafts of other countries and regions will be attempted,
considering Kerala’s strengths of comparatively low cost production
and high quality of workmanship in handicrafts. Skill development training
and common facility centres for the provision of commonly needed but expensive
equipment and professionalisation of marketing and export through the
public and private sectors are also integral to this strategy.(v) Bamboo

Considering the major scope for development of bamboo in Kerala both as
a raw material for the traditional handicraft sector as well as for modern
industry (as in China), a special programme is proposed for cultivation
of bamboo, creation of new designs for innovative products in the handicrafts
sector along with the appropriate skill development, promotion of bamboo-based
modern industries supported by technology adaptation and development by
R & D organizations.

(vi)
Cashew

Massive infusions of Government funds have not been able to ensure adequate
work to cashew workers in the co-operative and public sectors as the cashew
industry is facing a crisis of crashing prices internationally. Ensuring
adequate local production of raw cashew nuts by appropriate legal and
other facilitative measures, modernization of the industry to enhance
productivity, lowering of the local costs of production to prevent the
shifting of this industry to other low wage regions and strengthening
further the dominant position of Kerala cashew in the global market are
the proposed measures.

4. TEXTILES

Hardly
20% of the textiles requirement of the state is met by local production,
which comprises principally of the handloom and khadi sectors, the powerloom
sector (which produces over 75% of the requirement nationally) not having
been encouraged adequately in Kerala for fear of aggravating the already
problematic traditional sectors. The Government desires to correct this
policy on the lines of the Government of India’s Textile Policy
with adequate safeguards to prevent massive redundancies in the handloom
and khadi sectors.

(i)
Powerlooms

Steps
shall be taken for the phased introduction of powerlooms in the private
sector by training the younger and capable traditional handloom weavers
and providing loans / incentives to enable them to switch over to powerloom
production as a household industry. Factory type handloom societies which
opt to upgrade to powerlooms as well as new entrepreneurs will be encouraged
to set up new powerloom units with adequate incentives. The products of
the powerloom industry, especially those of the upgraded societies may
be marketed on a wholesale basis by Kerala State Textile Federation (TEXFED)
which will be strengthened to function as a development agency for the
powerloom sector.

(ii)
Spinning Mills

The
spinning mills of Kerala, especially those in the co-operative sector
are unable to meet the price competition due to low productivity, high
overheads, obsolete technology and inadequate funding for modernization
and working capital requirements. The State Government shall, through
the Department of Handloom & Textiles and TEXFED, enable units in
the private and co-operative sectors to sustain themselves by offering
technical advice and other services.

(iii)
Weaving / Garment Units

The
Government shall encourage, by a package of incentives and support, new
entrepreneurs who wish to start state-of-the-art textile/ garment units
of international quality as also existing industrialists who wish to upgrade,
modernize, add value or expand their activities, considering the immense
scope for domestic demand as well as the new opportunities for exports
following the lifting of the barriers and restrictions as per the Multi
Fibre Agreement by the end of 2004.

5. SICK UNITS

Past
efforts to identify and revive sick industrial units have not been effective,
possibly because they have not been backed by an in-depth analysis of
the causes of industrial sickness. The role of government shall be enhanced
from curative action to diagnosis and preventive action backed by an early
warning system for industrial sickness. At the micro level, effective
interventions by expert taskforces at the district level shall be made
to avoid impending sickness in identified industrial units and to advise
the Government to take policy and fiscal initiatives at the macro level,
which would avoid the propensity/ endemicity of certain sectors for sickness.

6. ELECTRONICS
& INFORMATION TECHNOLOGY

In
the high growth area of electronics and Information Technology (IT), the
emphasis will be on attracting substantial private investment in software,
hardware and telecommunications. Technology parks and other infrastructure
will be encouraged to be set up in the private sector. The Government
shall immediately set up a state-of-the art Tool Room-cum-Training Centre
to enable the hardware electronic industry (including embedded system
based industries) to use the latest CAD/CAM technology for their requirements.
A separate IT Policy will be brought out

7 FOOD PROCESSING
INDUSTRY.

As
agro/food-processing industry has enormous potential in the State, the
Government will actively promote it, bringing immense benefits to the
economy, adding value to agricultural produce, enhancing rural employment
and incomes. A comprehensive study will be arranged to identify and promote
the key products for which the State has comparative advantages in agro
/ food processing. Infrastructure such as Food Parks, incentives for units
manufacturing innovative value-added products, specialized entrepreneurial
development programmes, sourcing and development of the required technology,
financial assistance for setting up of cold chains from the farm to the
retail outlets, export facilitation etc are on the anvil. A separate division
in the Industries Department with a Secretary to Government to be in charge
of food processing, will be created to give focussed attention to this
sector.

8. BIOTECHNOLOGY

The
twenty first century is expected to be the century of the life sciences.
Biotechnology (BT) is poised to make significant contributions in agriculture,
human and animal health care, environment management and process industries.
The strategy of the State will be to:

·
Establish an internationally competitive business infrastructure and environment
for the BT industry in the State, on par with the best facilities and
practice worldwide.

·
Develop Kerala as a global centre of excellence in biotechnology by up-to-date
education and training for the creation of a large pool of multi-skilled,
technically competent manpower and organizations for state of the art
biotechnology research in the State with the assistance of Rajiv Gandhi
Centre for Biotechnology, Thiruvananthapuram.

·
Create an appropriate pro-business, pro-enterprise, legal, regulatory
and commercial framework to facilitate the rapid growth of BT industry
in the State.

·
Develop and use BT incubators in appropriate institutions to nurture nascent
enterprises and provide laboratory equipment and mentoring support.

The
Government of Kerala will encourage adaptation, import substitution and
indigenisation of technology. Consultancy/studies will be used to identify
and develop areas in biotechnology suitable for the State, such as medical/agricultural/industrial
biotechnology etc. The biotechnology park of Kerala Industrial Infrastructure
Development Corporation (KINFRA) will integrate resources and provide
a focussed institutional set up for accelerated commercial growth of BT.
The area for BT could include:

The
state-level task-force on biotechnology will co-ordinate the efforts of
the Department of Industries, other development agencies and R&D Centres
for the integral development of biotechnology industry in the state.

9. INFRASTRUCTURE
DEVELOPMENT

(i)
General

The
overall approach towards the development and upgradation of infrastructure
will be to enable optimum utilization of the State’s opportunities
and resources with the involvement of the private sector.

The
Government shall endeavour to facilitate notified Special Economic Zones
and bring in a special legal dispensation enabling a more liberalized
environment within specified industrial parks, estates and notified areas.

The
Kerala Infrastructure Development Act is expected to kick-start the private
infrastructure development of the State and bring about revolutionary
changes in the availability and quality of infrastructure in the State.

Transparent
methods for inviting expressions of interest shall be adopted wherever
private participation in infrastructure is involved, especially in projects
where protection of public interest is to be given top priority. Whenever
expressions of interest are inadequate or the process fails to identify
promoters satisfying the pre-requisites, alternate methods such as entering
into MoUs may be resorted to.

Setting
up of industrial areas in the private sector will be facilitated by the
government acquiring land etc. Industrial parks for various sectors and
groups including for women can be considered. The development of industrial
estates and industrial areas by private investors could be on BOT/BOOM
etc. basis.

The
development of transport infrastructure and systems by the private sector
will be a priority. For instance, the waterways in the State shall be
developed with the participation of the private sector and made navigable
particularly for barge transport.

Wherever
feasible, industrial parks shall have provisions for industrial incubators
with the required infrastructure and services brought in through private
participation.

Educational
and research institutions of international standards related to business/
industry may be provided land in industrial parks/growth centers at concessional
rates. Lands outside these may be acquired by the government for them
at their cost.

Title
deeds will be given, wherever feasible, to all industrialists holding
industrial lands on outright purchase by them. The required amendments
will be brought to the rules in this regard with suitable delegation of
the powers to issue title deeds.

A
fund will be created for KINFRA to take up preliminary/feasibility studies
for infrastructure project development activities under various departments.
Kerala State Industrial Development Corporation Ltd (KSIDC) can also partially
finance studies for such projects in the private sector if found relevant
and in public interest.

(ii)
Industrial Development Zones

Industrial
Development Zones (IDZ) with conducive environment and incentives with
adequate legal safeguards will be established in the following locations:

1.
Thiruvananthapuram

2.
Kochi

3.
Kanjikode (Palakkad)

4.
Kozhikode

Besides
these, an Industrial Corridor will be developed between Eloor in Ernakulam
and Kochi airport as a Wireless SEZ. All the benefits enjoyed by the Units
within the Special Economic Zone, Kochi and other parks established by
the State Government which are relevant will be extended to the entrepreneurs
investing in the IDZ and Corridor. Besides, engagement of workers on contract
basis in these Zones / Corridor will be enabled based on a code of conduct
to be mutually agreed to between the entrepreneurs and their employees.
Units in these Zones will be declared as public utility service as per
the Industrial Disputes Act. The Zone authorities would have the exclusive
license from KSEB for the retail distribution of power within the zone.
Extensive areas will be brought under these Zones/ Industrial Corridor
for which land acquisition will be initiated immediately by KINFRA. These
Zones shall be developed with the active participation of the private
sector with the involvement of KINFRA and KSIDC on the model of the Positra
Special Economic Zone in Gujarat. The Government shall consider permitting
KSIDC/KINFRA in individual cases to convert the cost of land/built up
modules as equity in the units in the IDZ / the Industrial Corridor.

The
non-availability of industrial land due to the high population density
of Kerala and the necessity for fostering a new work culture within the
Zones, are the prime considerations for establishing such Zones as in
China which has thereby successfully attracted international capital investment.
The Government believes that the success of the industrialisation effort
of Kerala would be contingent on the proper implementation of this concept.

(iii)
Power

The
power industry being the life line for all economic development, special
endeavour will be made by the Power Department to ensure techno-economic
viability of Kerala State Electricity Board by revamping and such other
management interventions. A State Electricity Regulatory Commission will
be constituted. Special significance will be accorded for LNG based generation
and the utilization of non-conventional sources of power. Industrial zone,
park and estate authorities will be empowered by the Kerala State Electricity
Board to distribute power as licensees to units set up within their respective
areas.

(iv)
Water

Steps
have been initiated by the Kerala Water Authority (KWA) and Kerala State
Industrial Development Corporation Ltd (KSIDC) for the implementation
of industrial water supply schemes including World Bank aided projects.

10. SERVICE SECTOR INDUSTRIES

The
State will promote all viable ventures in the service sector.

*
One focus will be on education and training in the fast growing areas
like information technology, microelectronics, biotechnology, telecommunications,
medicine, genetics, engineering, para-medical services etc.

*
Holistic and eco-friendly projects will be encouraged in tourism as the
sector has already been accepted as an instrument for generation of foreign
exchange, employment, poverty alleviation and sustainable social and economic
development.

*
Ayurvedic and other traditional forms of treatment have tremendous potential
for growth and will be encouraged

11. INCENTIVES

(i)
General

The
prevailing rates for State Investment Subsidy, which came into effect
on 11-7-2000, will continue. Units in the priority (thrust) sectors like
rubber based industries, information technology, agro based business including
food processing, readymade garments, ayurvedic medicines, mining, marine
products, light engineering, bio-technology and 100% export oriented units
will be eligible for a State Investment Subsidy of 15% of the fixed capital
investment (FCI), subject to a maximum of Rs.15 lakhs, whereas non-priority
sectors will be eligible for 10%. Units being set up in the backward districts
of Idukki and Wayanad and the industrial areas like Growth Centres and
Industrial Parks will enjoy the enhanced rate of subsidy viz. 25% subject
to a maximum of Rs. 25 lakhs for priority sector units and 10% up to Rs.10
lakhs for non-priority sector units.

Investment
in pollution control devices shall be eligible for an additional 15% subsidy,
subject to a separate ceiling of Rs.5 lakhs.

The
existing units undertaking expansion, diversification and modification
shall also be eligible for subsidy at the above rates.

The
Government shall ensure prompt disbursement of subsidy in future through
budgetary provisions and also will clear the existing arrears.

Units
launching R&D efforts with precisely identified goals and time-bound
programmes will be given incentives, the details of which will be worked
out jointly with the Department of Science & Technology, Government
of India.

In
case of projects with capital investment exceeding Rs. 50 crores, the
Government may consider a special package of incentives, except tax-based
incentives, on a case-to-case basis.

A
special package of incentives may be considered by Government for channelising
FDI and for large infrastructure projects. Infrastructure projects in
private sector would also be eligible for the set of incentives, if any,
that are offered to Government owned infrastructure projects.

Units
being set up in the Industrial Parks of the Government shall enjoy the
option to set off the eligible incentives against the cost of land.

(ii)
Exemption from Electricity Duty and Enhanced Tariff

a.
Exemptions from Electricity Duty for five years to new industrial units
from the date of commencement of their commercial production (as per G.O.(MS)No.71/90/ID
dated 21-05-1990) will continue.

b.
All new industrial units starting commercial production between 01-01-2002
and 31-12-2006 will be charged for a period of five years the same tariff
payable at the time of commencement of their commercial production irrespective
of subsequent enhancements of tariff.

(iii)
Waiver of Stamp Duty and Registration Fees

All
new units being set up in the various industrial parks and Corridor/Zones
will be exempted from payment of stamp duty and registration fee.

(iv)
Other Concessions

The
existing concessions for preparation of market and feasibility studies
will continue

The
existing price preference of 15% for the products of SSI units located
in Kerala and 10% for the products of medium and large industries located
in the State being given for all departmental purchases, purchases made
by State Public Sector enterprises and statutory corporations will continue
and effectively monitored in future.

The
State Government has recently introduced venture capital funding for the
financing of new, high-risk projects with participation in their equity
and management. The Kerala Venture Capital Fund (KVCF) constituted for
this, financed by the Small Industries Development Bank of India (SIDBI),
Kerala State Industrial Development Corporation (KSIDC) and Kerala Financial
Corporation (KFC), is geared up to invest in high growth areas like information
technology, biotechnology and food processing. The investment could go
up to 40% of the paid up capital in a single project, with a limit of
Rs. 2 crores, and a timeframe not exceeding 5 years.

12. INVESTMENT
PROMOTION

The
Government shall organize a well-planned and sustained marketing campaign
to promote Kerala as an ideal investment destination. Periodic open sessions
with industrialists will be held, presided over by the Chief Minister
at the ministerial level and by the Chief Secretary at the official level.
The task force headed by the Minister (Industries) will co-ordinate investment
promotion activities.

A
Special Cell will be constituted in KSIDC to provide escort facilities
to NRIs/ foreign direct investors, especially from the Gulf. It shall
also function as a Technology Development Cell.

13. SIMPLIFICATION OF PROCEDURES

The
Directorate of Industries & Commerce will be restructured to play
the role of facilitator and to act as a promotional agency with simplified
systems and procedures rather than as a regulatory agency.

The
Single Window Clearance Boards at the State, District and Industrial Area
levels will co-ordinate the issue of clearances required by new industrial
units being set up in the State within specified time-frames.

The
Government will move progressively to a self-certification regime and
verification by professional non-governmental bodies for various inspections
conducted by various Government departments being carried out at present.
A High Level Inter-Ministerial Task Force will be constituted to study
how this can be implemented and submit recommendations to Government,

14. STATE PUBLIC
SECTOR

The
Public Sector Undertakings (PSUs) in Kerala constitute the single largest
block in any State in India. Many PSUs in Kerala were relevant only in
a different era when they were expected to serve economic/social objectives
by constituting the nucleus for spin-off of downstream and upstream industries
and service establishments. It was also contextually relevant when the
domestic and international private sector was not coming forward to make
investments.

In
the changed circumstances, except in the case of infrastructure creation
for hi-tech industries, roads, public distribution systems, transportation
facilities in remote and financially unviable locations and for public
health, hardly any public purpose would be served by the PSUs that are
unable to sustain themselves.

The
PSUs which impose an unsustainable burden on the exchequer will be restructured,
ensuring a safety net to the workers, with investment from the private
sector. PSUs planning expansion / diversification / restructuring will
accept private investment.

The
objectives of restructuring are to:

§
Stem further outflow of scarce public resources to sustain the unviable
PSUs;

§
Reduce the public debt that is threatening to assume unmanageable proportions;

§
Use the proceeds of restructuring to meet employee separation costs, settlement
of creditors including financing institutions and other liabilities on
the government, for creating safety nets for employees and budgetary support
for infrastructure.

Restructuring
of the PSUs may include:

·
Investment by a strategic partner in diversification and expansion

·
Merger of PSUs having the same line of activity

·
Sale of equity to the public / financial institutions.

·
Management contracts.

·
Leasing of production facilities.

·
Closure of unviable divisions / PSUs.

To
spearhead the complex task of public enterprise reforms, an Enterprise
Reforms Committee (ERC) has been constituted by the Government.

15. CENTRAL
INVESTMENT

The
State Government shall constantly co-ordinate with the Government of India,
for ensuring higher Central investment in Kerala. Simultaneously, the
State will encourage private upstream and downstream units for Central
projects.

16. MINING

Intensive
efforts shall be made to exploit mineral resources. A separate Mineral
Policy is being brought out by the Government.

Upgradation
of and transfer of technology to industry will be priority strategy for
the industrial development of Kerala. The R&D institutions in the
State will be enabled to take up technology development in specific industrial
sectors in the state. Encouragement will be given for getting accreditation
with international quality testing agencies.

Grants
will be provided to industrial units for quality certification by approved
institutions/research laboratories at the rate of 50% of the expenditure
subject to a maximum of Rs. 2 lakhs per unit.

The
Government will help entrepreneurs obtain patents/intellectual property
rights (IPR). Up to Rs.5 lakhs will be provided, limiting to 50% of the
expenses, for procuring patent/IPR. The Government will constitute a Patent/IPR
Cell in KSIDC to assist entrepreneurs.

The
Government has appointed standing committees of experts, to study the
impact of the WTO agreements on various sectors and the suggestions of
the committees will be acted upon promptly to enhance the competitiveness
of Kerala’s products and services.

Local
government initiatives

The
decentralized governance implemented in Kerala is widely acclaimed as
a success in regional development. Local bodies have the advantage of
an outlook of coordination between various development departments and
institutions, focusing more on geographical rather than on departmental
boundaries. All the available resources of local self-governments will
be utilized for industrialisation. They will be encouraged to coordinate
with other industrial development departments, agencies and financial
institutions to promote feasible local enterprises identified by potential
surveys.

Implementation

For
sustained co-ordination between the various departments of the State to
implement decisions relating to the Industrial Policy, a committee under
the chairmanship of the Minister (Industries) will conduct periodic reviews.
The Government will ensure the effective implementation of the Single
Window Clearance Act for all new industrial projects. There will be sincere
appreciation of the needs and problems of entrepreneurs and a decisive
response to them. The required Government orders, statutory notifications
and amendments will be issued promptly from time to time.

A
task force headed by the Minister (Industries & Social Welfare) with
the Principal Secretary (Industries), Secretary (IT), Secretaries (Industries),
Managing Director, KSIDC and the Director of Industries and Commerce as
members will be constituted. Investors/entrepreneurs would be free to
approach the Secretary (Industries) who will be nominated as the Nodal
Officer of this task force. The task force shall meet once a week to discuss
and decide regarding issues and problems in the sectors impinging on industrial
development in Kerala, including the difficulties faced by individual
medium/large enterprises. Entrepreneurs, media, trade associations and
unions will have the opportunity to interact with the Nodal Officer who
will also be entrusted with the implementation of the communication strategy
to market Kerala as an attractive investment destination.

A Global Investors' Meet is planned for 2002 using international
consultants, to promote the State as an ideal investment destination.
The Meet will showcase, for prospective investors, projects identified
with the help of experts in various sectors like information technology,
transport, power, water supply, industry, tourism, public works, ports
etc.

Looking
Ahead

Kerala
offers numerous advantages to investors, but it has to overcome critical
challenges before it can attract substantial domestic and foreign investment.
It is hoped that the industrial policy, along with the other measures
to be simultaneously implemented by the various departments of the Kerala
Government, would change the negative perceptions about the State. Focus
will be given for developing the vision and strategies to make the State
one of the most attractive investment destinations in India. The Government
shall, while implementing this policy, identify the core sectors that
will act as growth engines, build the human capital, formulate a detailed
implementation plan and articulate the communication strategy to convey
this vision to potential investors in India and around the world.

For the successful implementation of the policy, a meeting of minds of
all the political parties, trade unions and the public at large is an
essential pre-requisite. Therefore, the Government intends to interact
frequently with all concerned so that there is a broad consensus as far
as possible. This will ensure continuity in policy, irrespective of changes
in Government.

The
Government looks forward to the wholehearted co-operation of all stakeholders
especially the people of Kerala.